ROBUST PARAMETER ESTIMATION FOR RANDOM EFFECT PANEL DATA MODEL IN THE PRESENCE OF HETEROSCEDASTICITY AND INFLUENTIAL OBSERVATIONS
Abstract
Panel data estimators can strongly be biased and inconsistent in the presence of heteroscedasticity and anomalous observations called influential observations (IOs) in Random effect (RE) panel data model. The existing methods (LWS, WLSF, WLSDRGP) address only the problem of IO but fail to remedy the combine problem of heteroscedasticity and IOs. Therefore, in this research we develop a method that will remedy the combine problem of heteroscedasticity and IOs based on robust heteroscedasticity consistent covariance matrix (RHCCM) estimator and fast improvised influential distance (FIID) weighting method denoted by WLSFIID. The simulation and numerical evidences show that our proposed estimation method is more efficient than the existing methods by providing smallest bias, and smallest standard error of HC4 and HC5
References
Baltagi B.H. (2008). Econometric Analysis of Panel Data. Wiley Chichester
Baltagi, B. H., (2001) Econometric analysis of panel data. 2nded. New York, John Wiley
Bramati, M. C., Croux, C., (2007) Robust estimators for the fixed effects panel data model. Econometric Journal, 10, 521 – 540.
Crowder, D., Hand, D. (1990) Analysis of repeated measures. Chapman and Hall, London,
Davidson, R. and MacKinnon, J.G. (1993). Estimation and Inference in Econometrics. New York: Oxford University Press.
Furno, M. (1996). Small sample behavior of a robust heteroskedasticity consistent covariance matrix estimator. Journal of Statistical Computation and Simulation 54: 115-128.
Habshah M, Norazan MR, Rahmatullah Imon AHM (2009) The performance of diagnostic-robust generalized potentials for the identification of multiple high leverage points in linear regression. J. Appl. Stat. 36(5):507–520.
Habshah M., Muhammad S. & Jayanthi A. (2017) Robust Heteroscedasticity Consistent Covariance Matrix Estimator based on Robust Mahalanobis Distance and Diagnostic Robust Generalized Potential Weighting Methods in Linear Regression. Journal of Modern Applied Statistical Methods 17(1):17 DOI: 10.22237/jmasm/1530279855.
Habshah Midi & Sani Muhammad (2018) Robust Estimation for Fixed and Random Effect Panel Data Models with Different Centering Methods. Journal of Engineering and Applied Sciences 13(17): 7156-7161.
Habshah Midi, Muhammad Sani, Shelan Saied Ismaeel & Jayanthi Arasan (2021) Fast Improvised Influential Distance for the Identification of Influential Observations in Multiple Linear Regression. Sains Malaysiana, 50 (7) (2021): 2085-2094 http://doi.org/10.17576/jsm-2021-5007-22
Lim, H. A. and Habshah M. (2016) Diagnostic robust generalized potential based on index set equality (DRGP(ISE)) for the identification of high leverage points in linear models. Computational statistics, 31:859-877
Lima, V.M.C., Souza, T,C., Cribari-Neto, F. and Fernandes, G.B. (2009). Heteroskedasticity- robust inference in linear regressions. Communications in Statistics-Simulation and Computation 39: 194-206
Maronna, R, A., Martin, R.D and Yohai, V.J., (2006) Robust statistics: Theory and methods, John Wiley. New York, ISBN: 10: 0470010924, 436.
Mazlina A., Habshah M. (2015) Robust centering in the fixed effect panel data model. Pakistan. Journal Statistics, 31( 1) 33 – 48.
Muhammad Sani, Habshah Midi & Jayanthi Arasan (2019) Robust Parameter Estimation for Fixed Effect Panel Data Model in the Presence of Heteroscedasticity and High Leverage Points, ASM Science. Journal 12, Special Issue 1, 2019 for IQRAC2018, 227-238
Rana, S., Habshah M, and Imon AHMR (2012) Robust Wild Bootstrap for stabilizing the variance of Parameter Estimates in Heteroscedastic Regression Models in the Presence of Outlier; Mathematical Problem in Engineering, Article ID 730328. doi: 10.1155/2012/730328
Rousseeuw, P. J., B. C. Van Zomeren, (1990) Unmasking multivariate outliers and leverage points. Journal of the American Statistical Association, vol.85, pp. 633–639.
Visek, J.A. (2015) Estimating the model with fixed and random effects by a robust method, Methodology Computational Applied Probability 17, 999-1014.
Veradi,V. & Wagner, J. (2011) Robust estimation of linear fixed effects panel data model with an application to the exporter productivity premium. Journal of Economics and Statistics. 231(4) 546 – 557.
Copyright (c) 2021 FUDMA JOURNAL OF SCIENCES
This work is licensed under a Creative Commons Attribution 4.0 International License.
FUDMA Journal of Sciences
